(Kitco News) - Speculators exited bullish positions in U.S. futures and options metals markets as sharp drops in prices likely spurred selling, according to U.S. government data.
In all precious and base metals futures and options positions combined at the New York Mercantile Exchange and its Comex division, speculative traders cut long positions, according to the Commodity Futures Trading Commission's weekly commitment of traders report. The data is of May 10. The result meant a drop in the net-long position for these types of traders in the disaggregated report and for nearly all markets in the agency's legacy report.
Prices fell for all most-active futures contracts during the reporting time period. Comex June gold fell $23.50 an ounce, settling at $1,516.90 on May 10. May silver futures dropped $4.099 an ounce to $38.486. Nymex June platinum slid $59.60 an ounce to $1,800.90 and July palladium fell $49.75 an ounce to $732.65. July Comex copper ended down 21.1 cents a pound to $4.0420.
Managed-money traders in the disaggregated gold report cut 17,312 longs and added 2,335 shorts, pushing down the net-long gold position to 198,607 contracts. This is the smallest net-long position for the gold speculators since March 22. In the producer and swap dealer category, longs were added and shorts cut for both, lowering their net-short position.
In the legacy report, non-commercials cut 22,312 longs and added 1,228 shorts, lowering the net-long to 212,964 contracts. Commercials added to longs and cut shorts, lowering their net-short position.
Ken Morrison, founder and editor of online newsletter Morrison on the Markets, said this is the third week in a row of speculators opting to exit longs. He said this data, combined with the level of ownership in the gold exchange-traded funds, show there might be a loss of investor ownership in gold. "While the trend still indicates prices well above the long-term trend support, I remain of the view gold prices and investor attitudes toward owning gold indicate the balance of price risk remains skewed to the downside," he said.
Silver saw a significant drop in the net-long position for managed-money traders in the disaggregated report. They sliced 6,196 longs and 324 shorts, lowering their net-long position to 19,228 contracts, the lowest since Jan. 25. Producers added both long and short positions, while swap dealers cut from both sides.
The legacy report saw an increase in the net-long position, but Barclays Capital said it was on the back of short-covering. Non-commercials cut 7,550 longs and 7,958 short positions, slightly raising the net-long to 29,512 contracts. Commercials added to both sides.
Commerzbank said the latest prices losses have in "no doubt been caused largely by short-term investors" as they noted that coin sales, an investment vehicle used by long-term traders, remain high.
Speculators in the platinum metals group reduced their net-long position in both platinum and palladium. They cut both longs and shorts in platinum, lowering the net-long to 21,073 contracts while in palladium they cut longs and added to shorts, reducing the net-long to 8,510 contracts.
Non-commercial accounts repeated their activity in the legacy report for PGMs. The platinum net-long fell to 24,418 contracts and the palladium net-long slid to 9,317 contracts.
In copper, speculators slashed their net-long exposure in both versions of the report, cutting longs and adding to short positions. The net-long for managed-money accounts in the disaggregated copper report is now 6,076 contracts, the lowest since July 6, 2010, and a drop from the previous week of almost 60%, noted Commerzbank. In the legacy report, the copper net-long is now 11,819 contracts, sliced nearly in half from the previous week's tally of 21,004 contracts, and is the smallest net-long since Aug. 24, 2010.
The bank said traders in base metals have become less optimistic, as witnessed by the sharp reduction in net-long positions.
"Concern about a possible glut of metal has been prompted by China expanding its mining activities on a generous scale," Commerzbank said. "In the first four months of the year, for example, China's copper output rose 16% to 1.727 million tons. However, given the closure of some outmoded smelting facilities, the electricity shortage, and the production targets set in the latest five-year plan, copper output is unlikely to be expanded as much as in recent years."
Morgan Stanley analyst Hussein Allidina said many investors appear to remain wary of the sector given heightened concern of global growth prospects. "We believe volatility will persist in near-term, although we are still constructive toward the long-term outlook for most metals as supply will remain constrained and demand steady," he wrote.
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By Debbie Carlson of Kitco News firstname.lastname@example.org
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